Startup Cemetery

A big resource for entrepreneurs and startup owners, in which we have collected and analyzed why +100 big companies have failed. Learn from mistakes, and avoid being part of the 90% of businesses that fail.

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Fab

Online design marketplace

General Information
Category
e-Commerce
Country
United States
Started
In 2009
Business Failure
Business Outcome
Acquired
Closed
By 2013
Cause of Failure
Multiple Reasons
Founders & Employees
Number of Founders
Five
Name of Founders
Bradford Shane Shellhammer, Deepa Shah, Jason Goldberg, Nishith Shah, Sunil Khedar
Number of Employees
Between 501 And 1000
Funding
Number of Funding Rounds
11
Total Funding Amount
$336.3M
Number of Investors
34
Description

Fab is a former e-commerce company which started out as a dating site. On June 9, 2011, the owners of the site decided to entirely focus on sales and daily design inspiration. The company grew so rapidly that it even surpassed Facebook’s record when it was able to reach the 1 million subscribers milestone within six months. The company grew their sales and exposure, even more when they introduced a social-concept similar to Facebook which enabled users to share the purchases they made on Fab.com on an interface called “Inspiration wall”.

Cause of Failure

Fab’s success echoed around the world, resulting in companies launching their own same exact replicas of Fab’s platform, including the Samwer brothers, who are known for launching replicas of thriving American businesses abroad like ebay, Amazon, etc. This news troubled Fab’s CEO. Jason Goldberg. To secure sales in the European region, Fab’s CEO insisted on acquiring three new startups in the region. The move to prematurely expand to Europe ultimately costed Fab over $60-$100 million dollars in capital.

A former Fab employee said that the decision to move towards Europe would’ve been fantastic if it had been done in a subsequent period, after the company became fully established in the U.S. The expansion led to serious funding issues inside the board.

Furthermore, in an attempt to solve the slow delivery rate to their customers, Fab decided to buy their own warehouse in New Jersey. This solution was initially successful as the delivery time went down from 16.5 days to only 5.5 days.  This became the perfect opportunity for Fab to exponentially grow their product inventory. Sales rose up rapidly but what the company didn’t immediately seem to realize was that by scaling up their inventory, they would lose their competitive edge for which they were known for, “providing personal and intimate designs”. The company focused too much of the funds on several initial marketing campaigns which led people into buying an initial product but didn’t help in developing customer purchase patterns they could rely on. The plan on expanding their product inventory backfired as customers realized that they could find the same products for a cheaper price and a faster delivery on Amazon. Customers left Fab in exchange for a better service from Amazon.

In the middle of 2014, CEO Jason Goldberg concluded that it was better to sell the remaining parts of Fab to a prospective company.  In the end, the $1-billion-dollar worth company was sold to PCH Innovations for only $15 million dollars.

Go on Reading

WOW Air

Ultra-low-cost transatlantic airline service

Transportation
Bankruptcy
-
Multiple Reasons
Transportation
Iceland
In 2011
By 2019
One
Between 51 And 100
No Data
Multiple Reasons
Bankruptcy
Maple

High-quality food delivery startup

Food and Beverage
Acquired
$29M
Bad Business Model
Food and Beverage
United States
In 2014
By 2017
Two
Between 101 And 250
Between 10M 50M
Bad Business Model
Acquired
Fuhu

Designer and seller of cloud-served softwares

Software and Hardware
Acquired
$66.2M
Mismanagement of Funds
Software and Hardware
United States
In 2006
By 2015
Three
Between 501 And 1000
More Than 50M
Mismanagement of Funds
Acquired
Call9

On-demand doctors in emergency situations

Health
Shut Down
$34M
Bad Business Model
Health
United States
In 2015
By 2019
Three
Between 101 And 250
Between 10M 50M
Bad Business Model
Shut Down
Shyp

On-demand shipping startup

Transportation
Shut Down
$62.1M
Multiple Reasons
Transportation
United States
In 2013
By 2018
Three
Between 11 And 50
More Than 50M
Multiple Reasons
Shut Down
Stratolaunch

Launching rockets into space from airplanes

Transportation
Shut Down
-
Lack of Focus
Transportation
United States
In 2010
By 2019
One
Between 501 And 1000
Nothing
Lack of Focus
Shut Down
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